The French economy posted little growth in the third quarter as household spending stagnated and a sharp rise in inflation in October highlighted the headwinds ahead in the final quarter of the year.

The French economy grew by 0.2% in the July-September period, in line with market expectations, according to preliminary data from the official statistical agency INSEE.

Meanwhile, consumer prices in October soared. In EU harmonized terms, inflation increased by 1.3% month-on-month, driven by the cost of oil products and food prices.

The year-on-year rate stood at 7.1%, compared to 6.2% in the previous month, according to INSEE, surpassing the previous record of 6.8% reached in July by the second largest economy in the euro zone.

The rise in inflation in October came after two consecutive months of slowdown in consumer prices. France has fared better than its neighbors in reining in price rises, although some economists have warned that its heavy spending on general protection for households was postponing the impact.

The French data comes a day after the European Central Bank raised interest rates again, concerned about rapid price growth. It raised its deposit rate by another 75 basis points, to 1.5%, the highest level since 2009.

The INSEE forecast at the beginning of the month a stagnation of growth for the last three months of the year.

The outlook for France remains difficult as inventories are likely to contribute negatively to growth from next quarter, according to analysts at ING.

“In fact, deteriorating order books and the current high level of inventories are likely to lead to a voluntary reduction of inventories by companies in the coming months.”

“Furthermore, with investment at half-staff, risks to energy supply, persistently high inflation and a general slowdown in export demand, it is difficult to expect a strong recovery in growth in the second half of 2023.”

French President Emmanuel Macron warned monetary policymakers this month during a newspaper interview against “demand destruction.”

ECB President Christine Lagarde on Thursday rejected political criticism that rapid rate hikes threaten to push the euro zone into recession, arguing that her job is to control inflation.

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